European finance ministers said this morning a US-led downturn had pushed much of their region to the brink of recession - something they dismissed as implausible only a few months ago.
In talks also attended by central bank chiefs, the ministers were expected to plump for a 'grin and bear it' strategy because of high inflation and a reluctance to defy EU budget rules by spending their way out of trouble with public money, US-style.
"The weakening in growth is considerably worse than we thought some months ago," said Jean-Claude Juncker, Luxembourg's prime minister and finance minister, and also chairman of the Eurogroup club of euro zone finance ministers.
But he did not see the region sliding into a deep or lasting recession: "The slowdown is very grave ... but I don't think that we are undergoing a period of long-stretched recession."
European Central Bank President Jean-Claude Trichet, who has refused to cut interest rates, said yesterday inflation was a problem of the "first magnitude".
The meeting in the French southern Riviera city of Nice came just two days after new economic European Commission estimates showed Germany, Spain and Britain sliding into recession and economic growth in the region overall close to standstill.
French Economy Minister Christine Lagarde set the tone for a two-day session her country organised as holder of the rotating presidency of European Union, spanning 27 countries of which 15 share the euro currency.
"This meeting takes place in a difficult economic context," she wrote in French daily
Le Figaro.
Over the past year, Europe had suffered a triple external shock - the financial crisis that began in the United States, oil price rises that raised costs for firms and hit household finances, plus a strong rise in the exchange rate of the euro.
"These shocks, coupled with the slowdown in world demand, have strongly reduced European growth," she said.
The meeting started today with finance ministers of the euro zone and will widen later in the day to include ministers and central bankers of the entire EU.
Officials in France and other countries said ahead of the Nice talks nobody was looking to imitate the US response to the downturn there which has seen interest rates slashed and a $100 billion returned to taxpayers this year.
German Finance Minister Peer Steinbrueck said it would be a waste of money in Europe: "I am against a European economic stimulus programme. I also think in Germany we would be ill advised to implement an economic stimulus package."